4 things you must know about open enrollment season

lynnetter Khalfani-Cox photo boxOpen enrollment season is here, and that means you likely have some serious choices to make about your benefits package on the job – especially your healthcare options.

With employers increasingly shifting healthcare costs to workers, it's important to know all your alternatives before selecting the optimal healthcare coverage and benefits package that's right for you.

Here are four things you must know about open enrollment season:

1. It's about more than just routine health insurance

When most of us think about our healthcare benefits, we tend to focus on what's covered and what's not, mainly considering routine medical such as annual checkups, various health screenings, dental coverage or eye exams.

But what if you're planning to have major surgery next year or perhaps to have a baby? Then picking the right plan now can save you a bundle of money.

"Health insurance coverage can be worth thousands of dollars a year, and so can maternity and paternity benefits," says Kimberly Palmer, author of Generation Earn: The Young Professional's Guide to Spending, Investing and Giving Back.

Also, even though the emphasis is on healthcare coverage, open enrollment season is the time many companies are now emphasizing the value derived from a host of other benefits, including:
  • gym membership
  • commuting rebates
  • employee discounts
  • tuition reimbursement plans
Indeed, the Wall Street Journal (subscription required) reports that for the first time in years, many employee benefits are getting more lavish. Some of these options may require you to say yes or no to the benefit being offered – and you may have to do it during the open enrollment period.

2. Your Benefits Might Have a "Use it or Lose it" Feature Most healthcare plans come into two categories: FSA offerings or HSA plans.

The Flexible Spending Account, or FSA plan, is a "use it or lose it" proposition – meaning any benefits you haven't used up or taken advantage of by December 31 are typically gone.

An HSA, or Health Savings Account, doesn't work that way. By law, a Health Savings Account must be linked to a high-deductible health insurance plan. In 2010, the minimum deductible for single coverage is $1,200; for family coverage, the minimum deductible is $2,400.

Premiums for high-deductible plans are usually lower than those for traditional plans, which may explain why enrollment in HSAs is booming. Back in 2005, there were just 1 million people enrolled in HSAs. Today, there are more than 10 million.

Even though they function differently, both FSA plans and HSA plans are tax-advantaged because they let you save money tax free for eligible healthcare expenses. You then get reimbursed for those healthcare costs.

Both types of plans are also going to see important changes in 2011.

For example, due to the Affordable Care Act enacted in March, a new uniform standard will apply to FSAs and HSAs effective Jan. 1, 2011.

Under the new rules, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change doesn't affect insulin, even if purchased without a prescription, or expenses such as medical devices, eye glasses, contact lenses, co-pays, and deductibles.

This means that if you use funds from your FSA or HSA to reimburse the cost of over-the-counter prescriptions and you don't have a prescription, your reimbursement amount will be considered gross income and it will subjected to an additional tax of 20%.

"Employees should take these changes into account as they make health benefit decisions for 2011," says Gregory Lauray, a CPA in Bethlehem, PA

3. There are no "do overs" for a year

During open enrollment season, one question people often ask is: Can I later change my mind and switch healthcare plans? Unfortunately, the answer is no. At least, you can't change your mind in the near-term. You're usually forced to stick with the same plan until the next open enrollment season, unless you experience a change in your family circumstances, such as getting married or divorced or having a baby, naturally or via adoption.

4. You should pick the best you can afford, but skip some things

To get the best healthcare policy at the most reasonable price, consider three factors: price, coverage and ease of use. While affordability matters greatly, don't let the monthly premiums be the sole criteria.

Also look at the prescription drug costs on a plan, the deductible you have to pay before benefits kick in, as well as overall limits on how much you can be expected to shell out in any given year.

Regarding your coverage, find out what services and procedures are included – as well as those that are excluded before picking a plan. Don't make the mistake of picking a policy with rock-bottom pricing only to later discover that it only covers major injuries or catastrophic illnesses.

Once you feel comfortable with a health plans pricing and level of coverage, make sure you also find out the process for submitting claims, whether or not toll-free phone help and online assistance is available from a health insurer, as well as how easy it is to go to specialists or consult doctors of your choice, both in and out of the healthcare network.

Lastly, don't be surprised if open enrollment season becomes the period during which your company trots out a slew of health-care or insurance-related policies and pitches. Some of these you should just say no to.

For example, most people should pass on "specific illness" policies, those that only cover you if you're stricken with specific ailments like cancer or diabetes. You should also decline other insurance offerings for young family members, such as life insurance for your children. Unless your kid is a child actor or is somehow raking in big bucks, you don't need that kind of coverage. Life insurance for minors is mostly a waste of money.
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